Analysts have questioned the industrys ability to sustain several online paper trading marketplaces after PaperExchange.com withdrew its initial public offering (IPO), citing difficult market conditions.


Following the announcement, US-based B2B e-commerce company Internet Capital Group (ICG) increased its ownership in PaperExchange.com from 20% to 83%.


Andrew Mitchell, an analyst at Merrill Lynch, said there was scope for Internet-based exchanges, but not as many as there are around at present.


It may be difficult for them to get a market share while demand is so great, he added. However, when demand is low things could turn in their favour.


Denis Christie, a paper and packaging analyst at Warburg Dillon Read, said: I would say there is only room for one or two, possibly one in the US and one in Europe. But he added that PaperExchange.coms future was pretty secure after ICGs move.


The firm hoped to raise 80m ($115m) from the IPO. We viewed it as a means to expand into Asia and Europe, but clearly it is not a receptive market for companies such as ours, said European managing director Colin Carroll.


Where you used to be able to go public with a great idea, you have to back that up with a positive cashflow. Even if the market improved, it would be several years before we went ahead with another IPO. With ICG owning more than 80%, our neutrality is firmly established.


Story by Andy Scott